Bruce, J".
(after stating the facts as above). It is difficult for us to find in the voluminous record which is before us or in the brief of counsel any ground whatever on which the plaintiff can seek equitable relief. He seeks the control of the corporation, and complains that stock has been sold since he obtained the majority thereof, and that the purpose of this sale was to take the control from him, when as a matter of fact the only purpose for which he acquired the stock which he did, and which he admits was acquired through “dummies” and in violation of the agreement between the stockholders- that no person should acquire more than ten shares, was in order that he himself might get that control. The evidence is clear that the stock of the corporation has at all times been for sale, and that quite recently and before the sale of the seventy shares which plaintiff now seeks to set aside, he himself had the opportunity of buying fifty of these shares and thus of gaining a permanent control. His proposition, however, is that if the motive of the directors of a corporation in selling the balance of the unsold capital stock, or in taking subscriptions thereto, is to take the control from one who holds the majority of the shares before such sale, such sale is fraudulent and may be set aside, even though such stock is sold at par and the money therefor is collected." This proposition is to us a novel one and has no support whatever in principle or in the authorities. Section 4525, Compiled Laws, of 1918 provides that, “after the secretary of state issues the certificates of incorporation as provided in § 4512, the directors named in the articles of incorporation must proceed in the manner specified . ' . . in their by-laws or if none, then in such manner as they may by order adopt, to open books of subscription to the capital stock then unsubscribed, and to secure subscriptions to the full amount of the fixed capital; and to levy and collect assessments thereon in the manner provided by article 10 of this chapter.”
The only understanding that we can derive from this section is that it was the intention of the legislature that the stock of private corporations, even if not to be looked upon as a trust fund, so that the same might not be depleted by dividends after once having been collected (see discussion in 4 Thompson on Corporations, 2d ed. §§ 3415, et seq; On this question we are not here required to pass), should be fully subscribed for as soon as possible, and this not merely for the protec[127]*127tion of the public, who, when it is dealing with a $10,000 or a $50,000 corporation, has the right to deal with one which is not on paper merely, but for the protection of the subscribers to the stock, who have the right to believe that they are subscribing for stock in a corporation which will have funds, or at any rate have subscribers who can be held for the amount which will be sufficient for fully developing the purpose and business of the institution. “The stockholders, too,” says the supreme court of Wisconsin, in Adler v. Milwaukee Patent Brick Mfg. Co. 13 Wis. 57, “being in general free from personal responsibility, the capital stock constitutes the sole fund to which creditors look for the liquidation of their demands. It is the basis of the credit which is extended to the corporation by the public, and a substitute for the individual liability which exists, in other cases. So far as the creditors are concerned it is regarded in the law as a trust fund pledged for the payment -of the debts of the corporation.” And how can stock which is not subscribed for, and which in cases of insolvency or approaching insolvency would never be subscribed for, be any protection to the creditors of a corporation or to the stockholders who have already subscribed, and who have rights which should be protected. It is to be remembered that in the case at bar we are not dealing with treasury stock which has been bought in or otherwise acquired by the corporation, but with the unsubscribed balance of the capital stock, which § 4525, Compiled Laws of 1913, says the directors must endeavor to have subscribed to the full amount, and which constitutes the only asset with which a corporation comes into the world. It is clear to us that no stockholder should be allowed to complain because the directors have done their duty and have not merely obtained subscriptions for, but have obtained the payment in full and at par for, the balance of the stock which the public and the other stockholders had the right to believe the corporation would .have subscribed.
It may be, and on this question we are not required to pass, that the stockholders of a corporation have a preference in regard to subscriptions to the treasury stock, but we as yet know of no case which has held that one who has purchased a majority of the stock of a corporation at a time before the stock has been fully subscribed has a vested interest in the control of the corporation so that the remaining stock may not be sold and subscribed for, nor can we see any reason [128]*128for sucb a holding. Tbe evidence, it is true, shows that tbe sale of sucb stock was not absolutely necessary to tbe existence of tbe corporation. It is quite clear, however, that with tbe increased money tbe business could be greatly enlarged, and more economically conducted. Even if it would not, tbe public and tbe stockholders bad a right to have tbe stock subscribed.
Not only is this true, but tbe plaintiff is hardly in tbe position to come into-a court of equity and complain of bis loss of tbe control of tbe corporation. It is clear from tbe record that be was tbe original promoter of tbe enterprise, and that as sucb be drew an agreement and a contract of subscription in which it was provided that no stockholder should bold more than ten shares. Tbe purpose of this agreement was that tbe elevator could be in fact, as well as in name, a fanners’ elevator, and that tbe farmers of tbe community might be generally interested and benefited thereby. It is clear that, even though he may not have signed this agreement himself, a number of tbe subscriptions were taken on it with bis knowledge and acquiescence. It is also shown that this agreement was later embraced in tbe by-laws of tbe company, and we find no objection in tbe record made by tbe plaintiff to tbe adoption of this by-law. It is also clear from" the testimony that, though plaintiff may have bad some doubt of tbe validity of tbe by-law, be was so far controlled thereby that be obtained tbe subscriptions to tbe shares of stock which gave him bis- majority in tbe names of bis family and bis friends for tbe purpose of evading the same. He now comes into a court of equity and asks relief because tbe officers of tbe corporation at one time refused to transfer on tbe books of tbe corporation tbe assignments of these “dummies” to him, though in spite of this fact be was allowed to vote tbe shares of stock at tbe meetings of this corporation. It is unnecessary for us to say whether tbe by-law was valid or not. It is sufficient to say that “tbe subscribers to tbe stock of a corporation may enter into an agreement under the terms of which neither themselves nor subsequent subscribers to tbe stock will be entitled to and receive more than tbe stipulated number of shares, and this agreement will be binding upon tbe parties to it, though not on tbe corporation. 4 Thomp. Corp. 2d ed. § 3523 • Hladovec v. Paul, 222 Ill. 254, 78 N. E. 619. A plaintiff who has violated this agreement, and thus obtained tbe control of a corporation, [129]
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Bruce, J".
(after stating the facts as above). It is difficult for us to find in the voluminous record which is before us or in the brief of counsel any ground whatever on which the plaintiff can seek equitable relief. He seeks the control of the corporation, and complains that stock has been sold since he obtained the majority thereof, and that the purpose of this sale was to take the control from him, when as a matter of fact the only purpose for which he acquired the stock which he did, and which he admits was acquired through “dummies” and in violation of the agreement between the stockholders- that no person should acquire more than ten shares, was in order that he himself might get that control. The evidence is clear that the stock of the corporation has at all times been for sale, and that quite recently and before the sale of the seventy shares which plaintiff now seeks to set aside, he himself had the opportunity of buying fifty of these shares and thus of gaining a permanent control. His proposition, however, is that if the motive of the directors of a corporation in selling the balance of the unsold capital stock, or in taking subscriptions thereto, is to take the control from one who holds the majority of the shares before such sale, such sale is fraudulent and may be set aside, even though such stock is sold at par and the money therefor is collected." This proposition is to us a novel one and has no support whatever in principle or in the authorities. Section 4525, Compiled Laws, of 1918 provides that, “after the secretary of state issues the certificates of incorporation as provided in § 4512, the directors named in the articles of incorporation must proceed in the manner specified . ' . . in their by-laws or if none, then in such manner as they may by order adopt, to open books of subscription to the capital stock then unsubscribed, and to secure subscriptions to the full amount of the fixed capital; and to levy and collect assessments thereon in the manner provided by article 10 of this chapter.”
The only understanding that we can derive from this section is that it was the intention of the legislature that the stock of private corporations, even if not to be looked upon as a trust fund, so that the same might not be depleted by dividends after once having been collected (see discussion in 4 Thompson on Corporations, 2d ed. §§ 3415, et seq; On this question we are not here required to pass), should be fully subscribed for as soon as possible, and this not merely for the protec[127]*127tion of the public, who, when it is dealing with a $10,000 or a $50,000 corporation, has the right to deal with one which is not on paper merely, but for the protection of the subscribers to the stock, who have the right to believe that they are subscribing for stock in a corporation which will have funds, or at any rate have subscribers who can be held for the amount which will be sufficient for fully developing the purpose and business of the institution. “The stockholders, too,” says the supreme court of Wisconsin, in Adler v. Milwaukee Patent Brick Mfg. Co. 13 Wis. 57, “being in general free from personal responsibility, the capital stock constitutes the sole fund to which creditors look for the liquidation of their demands. It is the basis of the credit which is extended to the corporation by the public, and a substitute for the individual liability which exists, in other cases. So far as the creditors are concerned it is regarded in the law as a trust fund pledged for the payment -of the debts of the corporation.” And how can stock which is not subscribed for, and which in cases of insolvency or approaching insolvency would never be subscribed for, be any protection to the creditors of a corporation or to the stockholders who have already subscribed, and who have rights which should be protected. It is to be remembered that in the case at bar we are not dealing with treasury stock which has been bought in or otherwise acquired by the corporation, but with the unsubscribed balance of the capital stock, which § 4525, Compiled Laws of 1913, says the directors must endeavor to have subscribed to the full amount, and which constitutes the only asset with which a corporation comes into the world. It is clear to us that no stockholder should be allowed to complain because the directors have done their duty and have not merely obtained subscriptions for, but have obtained the payment in full and at par for, the balance of the stock which the public and the other stockholders had the right to believe the corporation would .have subscribed.
It may be, and on this question we are not required to pass, that the stockholders of a corporation have a preference in regard to subscriptions to the treasury stock, but we as yet know of no case which has held that one who has purchased a majority of the stock of a corporation at a time before the stock has been fully subscribed has a vested interest in the control of the corporation so that the remaining stock may not be sold and subscribed for, nor can we see any reason [128]*128for sucb a holding. Tbe evidence, it is true, shows that tbe sale of sucb stock was not absolutely necessary to tbe existence of tbe corporation. It is quite clear, however, that with tbe increased money tbe business could be greatly enlarged, and more economically conducted. Even if it would not, tbe public and tbe stockholders bad a right to have tbe stock subscribed.
Not only is this true, but tbe plaintiff is hardly in tbe position to come into-a court of equity and complain of bis loss of tbe control of tbe corporation. It is clear from tbe record that be was tbe original promoter of tbe enterprise, and that as sucb be drew an agreement and a contract of subscription in which it was provided that no stockholder should bold more than ten shares. Tbe purpose of this agreement was that tbe elevator could be in fact, as well as in name, a fanners’ elevator, and that tbe farmers of tbe community might be generally interested and benefited thereby. It is clear that, even though he may not have signed this agreement himself, a number of tbe subscriptions were taken on it with bis knowledge and acquiescence. It is also shown that this agreement was later embraced in tbe by-laws of tbe company, and we find no objection in tbe record made by tbe plaintiff to tbe adoption of this by-law. It is also clear from" the testimony that, though plaintiff may have bad some doubt of tbe validity of tbe by-law, be was so far controlled thereby that be obtained tbe subscriptions to tbe shares of stock which gave him bis- majority in tbe names of bis family and bis friends for tbe purpose of evading the same. He now comes into a court of equity and asks relief because tbe officers of tbe corporation at one time refused to transfer on tbe books of tbe corporation tbe assignments of these “dummies” to him, though in spite of this fact be was allowed to vote tbe shares of stock at tbe meetings of this corporation. It is unnecessary for us to say whether tbe by-law was valid or not. It is sufficient to say that “tbe subscribers to tbe stock of a corporation may enter into an agreement under the terms of which neither themselves nor subsequent subscribers to tbe stock will be entitled to and receive more than tbe stipulated number of shares, and this agreement will be binding upon tbe parties to it, though not on tbe corporation. 4 Thomp. Corp. 2d ed. § 3523 • Hladovec v. Paul, 222 Ill. 254, 78 N. E. 619. A plaintiff who has violated this agreement, and thus obtained tbe control of a corporation, [129]*129cannot come into a court of equity and complain because others have obtained control of the corporation, and this not by evading the agreement, but by doing that which the law contemplates.
There is, too, no merit in the proposition that, on account of the prosperous condition of the corporation and some accumulated earnings, the stock was worth more than par, and that a fraud was committed on the plaintiff by the sale at par. We are here, it is to be remembered, not dealing with treasury stock, but with the original unsubscribed capital stock, the value of which was fixed by the articles of incorporation. The record of the corporation in the past has shown that it has not been a wise thing to dissipate all of its earnings in dividends, and though the plaintiff complains that the directors are about to declare dividends and to apportion the same on the new stock, as well as on the old, there is absolutely no proof in the record of this fact. Whether the new stock would share in the past profits it is not necessary for us to determine. It is shown, indeed, that during the second year of the existence of the corporation accumulated profits of 1 per cent were entirely swept away by a failure of crops. The record shows also that no provision has been made for deterioration. It also shows that a feed mill is a part of the scheme of the corporation and reasonably necessary. It further shows that running capital is necessary in order to save borrowing money, and to be able to take advantage of the exigencies of the market.
Plaintiff’s sole and only ground of complaint when reduced to its essentials is that he has lost the control of the corporation by the officers of the corporation doing that which the statute contemplates that they should do, — that is, by obtaining subscriptions to all of the shares of capital stock, when he himself at no time would have had that control if he had not violated his agreement with the other stockholders. The record shows no mismanagement or business inability on the part of the directors. There is no pretense that any of the other stockholders own or control more than ten shares. We .agree thoroughly with the finding of the trial court that he does not come into equity with clean hands, and that he is not entitled to any relief herein, but should be left in the position in which the court finds him.
[130]*130The above considerations, we think, are the only ones that are material in this case, though other questions are involved.
The judgment of the District Court is affirmed.